Shares of Eastman Kodak (NYSE:EK) lost some ground today on news that two acquisitions will pull down near-term earnings projections. Investors should remember, however, that such moves are the company's lifeblood now that it is focusing on forward-thinking growth strategies.
In an interesting performance-based deal, Kodak agreed to pay $150 million in cash -- plus the potential for more -- to Germany's Heidelberger Druckmaschinen for the half of digital-color printer NexPress Solutions it didn't already own, digital black-and-white printing systems company Heidelberg Digital, and other assets.
Investors are no doubt reacting to the news that the acquired operations, while expected to boost revenue in coming years, stand to reduce the company's EPS substantially for the next three years until, Kodak hopes, it delivers a profit in 2007. However, a combined internal structure might help this by reducing costs.
But assuming things don't go horribly for the new operations, the revenue growth and profits they deliver down the line could be welcome. This is based on last year's numbers showing Kodak's imaging business delivering significantly better operating margins (and meaningful operating income) than its photography business, even with a far smaller revenue base.
Much is made of Kodak's forays into consumer digital photography, especially coming as it does at the expense, in some ways, of its traditional 35mm business. But imaging has already demonstrated that it can deliver growth and profits. It wasn't long ago that management could be criticized for not looking far enough ahead.
Now that the company has figured out how to do that, its investors must do the same.
Talk about the long-term outlook for this venerable American company on our Eastman Kodak discussion board.
Fool contributor Dave Marino-Nachison doesn't own shares of Kodak. He can be reached via email.
